Understanding credit scores

Many Idahoans could save $300 to $1,000 a month if they raised their credit score by 60 to 170 points so it reaches the excellent range — 760 to 850. That is why University of Idaho Extension Educator Luke Erickson, Rexburg, is expanding on his online presentation and game called “Credit Score Millionaire” by adding support materials to help raise awareness of what hurts and helps credit scores.

Employers also use credit reports

“Credit impacts so many things — your mortgage, insurance rates, even utility contract rates such as cell phones,” says Erickson. “Many people don’t realize that all kinds of employers also use credit reports as a quick test of things like a person’s reliability, integrity, and self-control, as well as credit worthiness. These are reasons why our credit reports are so important.”

Because a person’s credit worthiness cannot be posted until the age of 18, Erickson aimed his first educational products at 4-H youth plus high school teachers and students, but he finds the content also is helping adults and professionals to better understand what triggers the rise and fall of their credit scores.

What impacts credit scores?

“Most people know that missing a credit card or mortgage payment is bad for a credit score,” he adds, “but fewer realize that the percentage of credit you are using and the age of your active credit cards also make an impact. Suppose all your credit cards combined offer you a total of $30,000 in credit. Consistently carrying a balance of more than 10% — or more than $3,000, in this case — will begin to lower your score. The more you’re spending beyond 10% the more your score will drop. Many people don’t fully understand this,” he adds. “Also, keep open your older credit cards. Once you’ve used a credit card for 10 years, it is considered golden — a plus on credit scoring.”

Go to annualcreditreport.com

Credit scores rely on the most recent seven years of your borrowing and paying history. Only one creditscoring agency matters: that is FICO. FICO scores are calculated using information from the three main credit-reporting companies, or credit bureaus—Experian, Equifax, and TransUnion. These credit bureaus can make mistakes in their reports. That’s why it is important to review each one annually and challenge incorrect information. For the only truly free reports, go to annualcreditreport.com.

Erickson credits author Al Bingham and his book, The Road to 850, for much of his content. More than 1,000 Idaho adults and youth have tested his materials and learned from them.

Try materials yourself

You can view Luke’s online video, game and other materials at the Madison County Extension blog at http://extension.uidaho.edu/madison/?s=credit+score&searchsubmit=. Scroll down past other financial tips and information until you see the “Credit and Your Career” video, and below it, look for a PowerPoint slide show, “Welcome to Who Wants to be a Credit Score Millionaire?” See the video, play the game and learn.